Wednesday, December 7, 2011

With TVs, Microsoft Is Right and Apple Is Wrong

It’s the wrong price for the market. The bulk of television buyers are extremely price-sensitive. I know, I know; mobile phone buyers were (and are) price-sensitive, too. But 1) people replace their phones a lot more often than they replace their television sets, and 2) the iPhone didn’t take off when it cost $700, but when it cost $200. Likewise, the MacBook Air didn’t take off when it cost $1800-$3100, but when it dropped below $1000. If an Apple TV costs double its equivalent, it’s like the Mac Pro, or the first Apple TV; a specialty product, a marker, a hobby. I think Apple is through with hobbies.

It doesn’t match Apple’s strategic trajectory. Now, a premium television set could be a strong, profitable product. And Apple could start at a high price and gradually work to lower the cost and bring it to more customers, like they did with the iPod, iPhone or MacBook Air. But this seems more like a move Apple would have made ten years ago, or even four, when its products didn’t have great market share, and its customers were overwhelmingly concentrated in the U.S., where it sold premium computers to a dedicated base.

Everything Apple’s done in the last three years has been moving in the opposite direction. So has the market for HDTVs. I don’t think either of those will backtrack easily. And if they do, it’s actually a step backwards, not forwards. If Apple’s going to succeed in television, I think it will be by surprising everyone like they did with the first iPad: by bringing in a product right away that’s both inherently compelling and priced much lower than everyone expects. That will also keep copycat products from Google, Sony, Samsung or whomever at arm’s length.

It’s the ecosystem, stupid. The iPad was a success because it stood on the shoulders of the iPhone, the iPod Touch, the rejuvenated Mac lineup and the iOS App Store. At this point, Microsoft is trying to go in the other direction, borrowing elements from Xbox to drive interest in Windows Phone and Windows 8. In order to succeed, an Apple television set will have to employ the same kind of leverage. Only part of this can be the networked interaction between Mac and iOS devices or even apps common to all of them.We’ve written before about the role Apple’s iPods still play as a gateway device to the iPhone, iPad and Mac. It’s been easier for Microsoft to drive content agreements for Xbox because it can point to its fifty million units. Apple needs to do something similar for TV. iPads are part of that, but so is that little Apple TV box. If Apple introduced a new television set, don’t be surprised if they also overhaul that little box, but with much greater capabilities. It’s the iPod; it’s the Mac Mini; it’s their best chance to quickly turn an ecosystem of millions into tens or hundreds of millions.

A cool interface will not save you. Siri is remarkable, and over time, I can see both its voice interface and AI elements playing a huge role in search and commands on the television. But just like Kinect, Siri alone won’t get it done. Munster argues, and I agree, that the UI will have to incorporate and accomodate a mix of remotes, voice and touch control. The problem is that still doesn’t get you applications like group chat or any serious gaming. You can wave around an iPhone or iPod like it’s a Wiimote, or play Angry Birds on a big screen. But if you’re otherwise still stuck plugging in your Xbox or Wii to the new Apple TV, aren’t we just back to the cords-and-remotes problem again?Xbox solves this problem with some elegance; Kinect gives you motion and voice, remotes give you familiar interfaces that work for 80% of you want to do, paired smartphones give you added versatility, and wired or wireless controllers give you complete control for serious gaming. It’s easy to forget how huge the gaming industry is, and how closely it’s become tied to television, the broader world of entertainment, and global markets. But Apple hasn’t forgotten. They know how exactly how many games they sell for iThings. They have to deliver something that takes advantage of that opportunity.

You have to deliver compelling content. Google tried to make a software-driven TV with a snappy interface that hooked into a cable box. Content makers and intermediaries balked. Google TV was stillborn, and the company’s now mulling getting into the cable business itself. Apple is and always has been much better at dealing with the entertainment industry than Google. But its content strategy isn’t as clear as Microsoft’s, which has been willing to partner with anybody and everybody to bring movies, televisions, games and applications to Xbox.Does Apple continue on with iTunes a la carte model? Does it switch to a subscription model? Does it partner with the cable companies or try to route around them? Either way, you’re stuck with the two problems Jobs identified back in 2010. If you partner with cable providers, you’re stuck with the fact that there are no truly national providers in the way that there are national cellular carriers. If you try to disrupt cable providers, you have to overcome the inertia that comes with a subsidized cable box, and that tangled mess of cords and remotes once again. There are no good moves here; Microsoft’s strategy so far has been the best. But Apple could always pull a rabbit out of its hat.